Strenghts and weakneses of The Consumer Price Index (CPI)

        The Consumer Price Index is a measure of the prices of a blind drunk market field goal of some 300 consumer goods and services purchased by a typical urban consumer. The 1982-1984 check serves as the base stay so analysts can compargon other years changes with this base issue. The reputation of the market basket is fixed in the base period and is imitation non to change from one period to a nonher. The tenability for the assumption is because the consumer price index measures the make upliness of a invariant received of living. Critics claim that the CPI is inaccurate because it overstates the increases in the cost of living. For this agent, the CPI has been said to be inaccurate.         First, consumers do change their spending patterns. sluice though the composition off the market basket is assumed not to change, it does because consumers change their spending patterns. Because consumers substitute unhorse priced products in lieu of higher priced ones, the weight has shifted. The CPI assumes that this does not croak and therefore it overcompensates the standard of living.         Secondly, because the base period was over a decade ago, the type of the products has increased significantly, and therefore the prices should be higher. The CPI, however, assumes that the increases in prices is a result of inflation rather than quality improvements which is false.

hither also, the CPI overstates the rate of inflation.         Many consumers do not sound judgment the overcompensation of the CPI because in most c ases it mode more cash in their pockets, b! ut there are some consequences. This whitethorn cause an ongoing inflation trend. The reason why the authorities does not restrict it is because they are unhinged about acquire re-elected. Even if the President does call for a revision of the CPI, sexual congress would defeat it to keep their... If you wishing to get a estimable essay, order it on our website: OrderCustomPaper.com

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